BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 578|
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THIRD READING
Bill No: AB 578
Author: Leno (D)
Amended: 8/26/04 in Senate
Vote: 27 - Urgency
SENATE JUDICIARY COMMITTEE : 6-0, 8/25/04
AYES: Escutia, Morrow, Ackerman, Cedillo, Ducheny, Kuehl
NO VOTE RECORDED: Sher
SENATE APPROPRIATIONS COMMITTEE : 11-0, 8/26/04
AYES: Alpert, Battin, Aanestad, Ashburn, Burton, Johnson,
Karnette, Machado, Murray, Poochigian, Speier
NO VOTE RECORDED: Bowen, Escutia
ASSEMBLY FLOOR : 78-0, 7/7/03 - See last page for vote
SUBJECT : County recorders: electronic recording
SOURCE : California Association of Realtors
California Mortgage Bankers Association
Fannie Mae
DIGEST : This bill enacts the Electronic Recording
Delivery Act of 2004, for the purpose of establishing a
system to record digital electronic records of real
property instruments, which may be used statewide. The
bill requires the State Attorney General (AG) to adopt
regulations for certification and oversight of electronic
delivery systems and associated software and other
services. The bill authorizes the county to pay for AG
costs associated with regulation and oversight and to
CONTINUED
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collect a $1 fee from every recording of an instrument in
the county to pay for costs associated with the system.
The bill authorizes a county recorder, upon approval by the
board of supervisors and AG certification of the system to
establish an electronic recording delivery system.
ANALYSIS : Existing law generally specifies that the
recorder of any county may, in lieu of a written paper,
accept for recording a digitized image of a recordable
instrument, subject to specified conditions.
This bill enacts the Electronic Recording Delivery Act of
2004, to authorize a county recorder, upon approval by
resolution of the board of supervisors and system
certification by the AG, to establish an electronic
recording delivery system for the delivery for recording of
specified digitized and digital electronic records, subject
to specified conditions, including system certification,
regulation, and oversight by the AG. It authorizes a
county recorder to include in its electronic recording
delivery system a secure method for accepting for recording
a digital or digitized electronic record that is an
instrument of reconveyance, substitution of trustee, or
assignment of deed of trust, subject to specified
conditions. It requires participating counties to pay for
the direct cost of regulation and oversight by the AG, and
authorizes those counties to impose fees to cover those
costs. It authorizes the AG to charge a fee directly to a
vendor seeking approval of software and other services as
part of an electronic recording delivery system. Fees paid
to the AG under these provisions would be deposited in the
Electronic Recording Authorization Account, which will be
created in the Special Deposit Fund and continuously
appropriated to the AG for these purposes.
This bill authorizes the AG or a district attorney or city
prosecutor to seek specified civil remedies.
The AG will be required to evaluate the electronic
recording delivery systems, and report to both houses of
the Legislature on or before June 30, 2009.
This bill is sponsored by the California Association of
Realtors, the California Mortgage Bankers Association, and
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Fannie Mae (FNMA).
Background
In July 1999, the AG's Task Force on Electronic Recordation
presented its recommendations pursuant to the charge given
the Task Force by AB 1906 (Brewer), Chapter 463, Statutes
of 1998. The Task Force found that electronic recording of
real property documents could save local agencies and
businesses plenty of time and money. However, the Task
Force warned that the use of these new technologies also
"exposes the most sensitive of public records to the
possibility of corruption, damage, or destruction."
AB 1906 also approved pilot projects in Orange and San
Bernardino Counties. While San Bernardino County's pilot
project never got off the ground, Orange County has
instituted an electronic recording system that utilizes
dedicated transmission lines between specified escrow/title
companies and the county recorder's office. The dedicated
lines appear to ensure both (1) the security of document
transmission and (2) the identity of the transmitter.
According to the Task Force report, the results of the
Orange County pilot project have been promising: decreased
costs of doing business, decreased document processing
times, and expedited public access to records.
In the last four years, several bills were introduced to
allow specific county recorders to join the pilot projects
or establish new ones. When AB 1732 (Torlakson, 2000) was
heard in the Senate Judiciary Committee, the bill included
regulation of systems and contracts by the AG. The bill
died on the Senate inactive file.
AB 2614 (Oller, 2000) allowed the Placer County recorder to
establish a system for electronic recording that has been
reviewed and approved by the AG, and to authorize the AG to
suspend use of the system upon a finding that fraudulent
activity has occurred as a result of a system defect in the
electronic recording of documents. AB 2614 was vetoed by
then Governor Davis, citing unbudgeted costs to the AG's
office, and raising a concern about security and integrity
of records accepted for recordation.
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SB 407 (Sher, 2001) established pilot projects in 12
counties for electronic recording using a system reviewed
and approved by the AG and requiring the counties to select
a security consultant from a list of computer security
experts prepared by the AG. The bill was held in the
Senate Judiciary Committee. Negotiations among the
stakeholders ensued during the interim, but the legislation
was allowed to die the following year.
AB 578 (Leno), introduced in 2003, is the product of
further negotiations among the county clerks, district
attorneys, realtors, mortgage bankers, escrow and title
companies, to achieve a workable scheme for the electronic
recordation of instruments relating to real property.
While the basic framework for a viable system is contained
in the bill, it is still a work-in-progress. AB 578 is
limited in applicability, but will hopefully provide
sufficient data for a meaningful evaluation by the AG by
June 30, 2009.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/27/04)
California Association of Realtors (co-source)
Mortgage Bankers Association (co-source)
Fannie Mae (co-source)
Alameda District Attorney's Office
Alliance Mortgage Company
American Release Corporation
California Association of District Attorneys
California Business Properties Association
California District Attorneys Association
California Land Title Association
Charter One Mortgage
Citimortgage
Contra Costa County Clerk-Recorder
County of Placer
County of Riverside Assessor-County Clerk-Recorder
County of Sacramento
County of San Bernardino Auditor/Controller-Recorder
County of San Diego Assessor/Recorder/County Clerk
County Recorders' Association of California
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El Dorado County Recorder-Clerk
First American Title Insurance Company - Utah Division
Los Angeles County District Attorney's Office
Orange County District Attorney's Office
Peelle Management Corporation
ARGUMENTS IN SUPPORT : According to the author's office,
this bill supplies the missing piece that allows the
documents to be sent to the county recorder in electronic
form. In effect, it authorizes a county recorder to
utilize a high tech FAX, so long as it complies with
regulation by the AG. It is secure, fast, and will result
in substantial savings for both local government and
property owners.
This bill is a two-part authorization of electronic
delivery of real estate documents to the county recorder:
- It is a voluntary program both for counties and those
submitting documents.
- It is supervised and regulated by the AG.
- Only title companies, institutional lenders and
governmental entities may use the system.
- Only "digitized" or scanned hardcopy documents may be
used to encumber or transfer property.
- There is a simplified separate procedure for
reconveyance documents that allows delivery of lenders
releases in digitized or digital form. These documents
do not expose consumers to risk, and are so standardized
that they are the appropriate place to begin using pure
digital documents.
- Finally, this bill has "grandfather" language to
preserve existing Orange and San Bernardino counties'
authorization.
ASSEMBLY FLOOR :
AYES: Aghazarian, Bates, Benoit, Berg, Bermudez, Bogh,
Calderon, Campbell, Canciamilla, Chan, Chavez, Chu,
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Cogdill, Cohn, Corbett, Correa, Cox, Diaz, Dutra, Dutton,
Dymally, Frommer, Garcia, Goldberg, Hancock, Harman,
Haynes, Jerome Horton, Shirley Horton, Houston, Jackson,
Keene, Kehoe, Koretz, La Malfa, La Suer, Laird, Leno,
Leslie, Levine, Lieber, Liu, Longville, Lowenthal,
Maddox, Maldonado, Matthews, Maze, McCarthy, Montanez,
Mountjoy, Mullin, Nakanishi, Nakano, Nation, Negrete
McLeod, Nunez, Oropeza, Pacheco, Parra, Pavley, Plescia,
Reyes, Richman, Ridley-Thomas, Runner, Salinas,
Samuelian, Simitian, Spitzer, Steinberg, Strickland,
Vargas, Wiggins, Wolk, Wyland, Yee, Wesson
NO VOTE RECORDED: Daucher, Firebaugh
RJG:mel 8/27/04 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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